This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/luxembourg-limited-partnership

Limited partnerships are fund types that usually have illiquid strategies. They have been modelled on partnerships that can be setup in other jurisdictions such as United States, United Kingdom and the Cayman Islands.

Such funds invest into venture capital/private equity, debt markets or real estate. The AIFMD introduced in 2013 was instrumental in helping Luxembourg become a leading jurisdiction for funds that invest in alternative assets.

The partnership comprises a General Partner (LP), usually a SARL, and Limited Partners who are investors. This arrangement is governed by the Limited Partnership Agreement, or LPA. A Luxembourg Limited Partnership is not subject to any asset diversification requirements, nor any specific asset type.

There are three types of Limited Partnerships. The first is a Partnership Limited by Shares, or SCA. Structurally, the SCA is like a Public Limited Company.

The second is the Common Limited Partnership, commonly known as SCS or CLP. And the third, and most frequently used is the Special Limited Partnership, or SLP.

An SCA and a CLP have a legal personality, unlike an SLP. Other notable differences between an SCA and the CLP/SLP strutures is that the latter can be formed in front of a notary or by private deed, and typically governed by the Limited Partnership Agreement, unlike the SCA which comes under Company Law.

Also, the SCA is subject to taxation (but has access to double-taxation avoidance treaties), while the CLP and SLP are tax-passthrough structures.